Independent Financial Advisor fees query

Imnoexpert_2

I have spoken with a number of financial advisers recently and found the following fees.

Banks, and structured products accrued costs of 2-3% up front and 1 to 1.5% pa

IFA's - 1 to 1.5% up front and 0.5% pa (and this was remarkably similar across all of them)

I should stress that this is just my experience in my area based on my needs.

I found absolutely no interest or enthusiasm whatsoever for a flat fee from anybody. Where people reluctantly quoted an hourly rate they pitched against it, stressing the cost of them answering queries, or writing letters, or of visits and reviews They avoided an estimate of how many hours it would take or what would be involved. They stressed, rightly I think, not to get hung up on fees but to think of the returns which a good investment choice would make over 'say' a bank account. All wanted more per hour than my solicitor or architect.

As an observation I find the way costs of investing are accrued and described to by very complicated.

Imnoexpert_2

I looked up Metlife and found the following

"MetLife has been named company of the year at the Financial Adviser 2010 Service Awards."

"The awards are based on the results from a survey of over 9,000 IFAs, who were asked to rate the service they received from product providers over the past year."

Of course this just means IFA's like them. One would hope this is because the returns on investments are good. I don't know if this is so.

feesarefare

Imnoexpert wrote: »

I found absolutely no interest or enthusiasm whatsoever for a flat fee from anybody

But taking a percentage of the amount you invest is a flat fee for the adviser if he knows what you are going to invest , isnt it?

. Where people reluctantly quoted an hourly rate they pitched against it, stressing the cost of them answering queries, or writing letters, or of visits and reviews They avoided an estimate of how many hours it would take or what would be involved. They stressed, rightly I think, not to get hung up on fees but to think of the returns which a good investment choice would make over 'say' a bank account. All wanted more per hour than my solicitor or architect.

Thats because most adviser frims havent taken the time to actually
put together a fair fee charging model. They continue to cling to their commission models - they just call it a fee instead. Anything that is percentage based is a commission.

As an observation I find the way costs of investing are accrued and described to by very complicated

No wonder-its pretty rife judgeing by the almost daily posts on here, it appears many advisers seem to make it appear very complicated for some reason.

We lose business because we tell customers exactly what we will charge- they then go to the "free" IFA down the road.

Imnoexpert_2

feesarefare wrote: »

Imnoexpert wrote: »

But taking a percentage of the amount you invest is a flat fee for the adviser if he knows what you are going to invest , isnt it?


You are right of course. I meant a fee for work done. If I invest say £200,000 I wouldn't expect to pay twice the advice and implementation cost of investing £100,000. I am sure there are higher costs in doing this .. just not double. But I'm not in the industry so I don't know.

What I want is someone to say is "To sort out your investment will take :
1 A no charge 1 hour fact find
2 a hours (a determined after fact find) to talk to you in detail
3 b hours to research probable investments
4 c hours to talk to you about these recommended products
5 d hours to set up and action these products if you wish
6 e hours every say 6 months to review, consult and amend
Total cost will be hours times hourly fee and any commission I earn will be rebated back to you. You can drop out at any stage and only pay for hours worked.

I don't expect to be swamped by IFA'S keen to offer their services on this basis.

dunstonh

IFA's - 1 to 1.5% up front and 0.5% pa (and this was remarkably similar across all of them)

percentage fees are allowed but there should be a cap on them to stop them getting too large. Some firms use a flat rate with a low cap. Some use a tiered rate based on amount invested. The 0.5%p.a. for servicing is very common. its the upfront amount that can vary a lot.

I found absolutely no interest or enthusiasm whatsoever for a flat fee from anybody.

old school firms (Transactional mainly) wouldnt be enthusiastic but any firm looking at being around post RDR (end of 2012) shouldnt have any problem with it. Servicing firms will typically be happy with it as well. Any firm that doesnt have a decent fee structure or even already work on a fee basis now isnt prepared for RDR and that should give you an indication of their quality.

All wanted more per hour than my solicitor or architect.

Unfortunately, we run higher liability costs and for longer and the FSA and regulation drains money at a higher level. There is also far more going in costs. Regulation is a good thing but the FSA are scattergun (scud missile like) and expensive and that reflects in the charges.

As an observation I find the way costs of investing are accrued and described to by very complicated.

I would agree. With the FSA wanting ever layer stripped out and disclosed, this will make it more complicated than an all in bottom line figure. Although if you put in the effort to understand, you will probably find its cheaper once you realise who is getting what and why.

I had someone recently that chose not to use me as I told them I was fee based and not commission. Although the fee was lower than the commission. He just couldnt get his head around no matter how hard I tried. That was a flat fee as well. It will take time to educate people to understand that commission does not mean free advice and there has to be an appetite to understand and not many people at the moment have that appetite. They are just looking for the route or least resistance. Even if it means they end up with a poorer deal.